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Tuesday, November 17, 2020

EC World REIT Analysis @ 17 November 2020

Basic Profile & Key Statistics

EC World REIT (ECW) is a pure logistics REIT that owns 8 properties in China.

Performance Review

Gross revenue and NPI increased YoY by 10.8% and 14% respectively, mainly due to contribution from Fuzhou Ecommerce which was acquired in August 2019. Distributable income and DPU increased YoY by 3.5% and 2.4% respectively. ECW has retained 9% of 3Q distributable income at S$ 1.111 million. Including retention from 2Q at S$ 1.234 million and 1Q at 0.49 million, total retention is S$ 2,835 million, which is equivalent to 0.352 cent.

Lease Profile

Occupancy is slightly high at 96.7%, if includes the new lease at Wuhan Meiluote, occupancy would be high at 99%. WALE is short at 3.3 years where the highest lease expiry of 74.4% falls in 2024 and beyond. Out of this, 73.9% is from master leases of Fu Heng Warehouse, Stage 1 Bei Gan, Fuzhou E-Commerce, and Chongxian Port Investment, which leases would be expired in 2024. Weighted average land lease expiry is short at 34.74 years.

Debt Profile

Gearing ratio is moderate at 38.3%. Cost of debt is high at 4.2% despite 100% secured debt. Fixed rate debt % is low at 62.2%. Interest cover ratio is low at 2.5 times. WADE is short at 1.9 years where the highest debt maturity of 84.4% (estimated from the annual report) falls in 2022.

Diversification Profile

Top geographical, top property, top tenant and top 10 tenants contribution are high at 98.5%, 28.3%, 34.9% and 97.9% respectively. 

Key Financial Metrics

Property yield is high at 6.1%. Management fee is competitive in which unitholders receive S$ 8.93 for every dollar paid. Distribution on capital is moderate at 3.2%. Distribution margin is low at 41.2%. Including retention, management fees over distribution, distribution on capital and distribution margin figures would be 10.5%, 3.4% and 43.9%. 


Flat - DPU (include retention)

Slight Downtrend - NAV per Unit, Property Yield

Downtrend - Interest Cover Ratio, Distribution Margin (include retention)


Relative Valuation

i) Average Dividend Yield  - Average yield at 8.06%,  apply the past 4 quarters DPU of 5.442 cents will get S$ 0.675. Include retention, the DPU would be 5.793 cents which translates into S$ 0.72. 

ii) Average Price/NAV - Average value at 0.82, apply the latest NAV of S$ 0.893 will get S$ 0.73.

Author's Opinion

FavorableLess Favorable
High Occupancy (with Wuhan Meiluote new lease)All Income Received in RMB
High Property YieldShort WALE
Competitive Management FeesConcentrated Lease Expiry
 Short Weighted Average Land Lease Expiry
 High Cost of Debt
 0% Unsecured Debt
 Low Interest Cover Ratio
 Short WADE
 Concentrated Debt Maturity
 High Top Geographical Contribution
 High Top Property Contribution
 High Top Tenant & Top 10 Tenants Contributions
 Interest Cover Ratio Downtrend
 Distribution Margin Downtrend

ECW performance has not really been affected by COVID-19 situation. In October, ECW has secured new lease for Wuhan Meiluote which boots its occupancy from 35% to 81.1%. Coupled with built-in rental escalation for ECW master leases, ECW performance is expected to be improved. 

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss, or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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